Buying and selling cars - at what point does it become a business?

N

NancyBoo

New Member
My husband and I have been doing up cars together for the past year and selling them. Not excessively about 5 cars a year, it gives us a little project to work on together, as its a mutual interest for us both. We don't make masses of profit at all, but a friend advised that we could get in trouble for not paying tax on it. I dont want to stop doing it as its a really good activity to do together, but if hes correct then it could end up being quite costly. If we have to pay an extra 20% of the money as income tax then we would be losing thousands, and sometimes we only make a small amount of profit, with the costs of parts and everything involved. Based on the money we made last year and looking at https://www.income-tax.co.uk/ it said it would actually boost my husbands income to the next threshold and he'd have to pay 40% tax o_O Can anyone confirm if we do actually have to declare it as income or if this can be classed as a hobby?

Thank you
 
the best my google foo can come up with.

I believe HMRC looks for something called "Badges of trade" So these are questions you need to ask yourself. Annoyingly from what I gather it's not stacked in the hobbyist favour and if you honestly answer yes you'll likely find they'd want you to class yourself as a business.

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205

I mean I guess you could argue that you're car collectors and restoration is just part of car ownership but at the point that you've got regular turnover I think you're out of luck.

I'm sure someone else here would know more then me. As my experience is more to do with freelance artwork then actual cars.
 
Blitz. said:
the best my google foo can come up with.

I believe HMRC looks for something called "Badges of trade" So these are questions you need to ask yourself. Annoyingly from what I gather it's not stacked in the hobbyist favour and if you honestly answer yes you'll likely find they'd want you to class yourself as a business.

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim20205

I mean I guess you could argue that you're car collectors and restoration is just part of car ownership but at the point that you've got regular turnover I think you're out of luck.

I'm sure someone else here would know more then me. As my experience is more to do with freelance artwork then actual cars.
Click to expand...

Advice appreciated nonetheless, Thank you. Looks like you're right but as you said, someone else on here may have some experience of this.
 
I would say that because you are doing them up with the intention to sell them then yes it would have to be classed as a business.

If you bought them just to fix up and use daily, and then something happened and you needed to sell it then thats different.
 
At 5 cars a year or more, HMRC would see that as a business.

What you could do to help is alternately put your and your partners names on the logbooks so it looks like 2 or 3 cars a year each. If you could use a second address just for registering, that would help.
 
It's a business although at that level you will probably get away with it, unless someone reports you. Depending on your turnover you could also be liable for VAT, which is only applied to the profit on a used car. Best thing to do is talk to an accountant if you do want to be legit.
 
Bad situation. I hope you will solve this problem somehow. As far as I understand, your business won't be profitable if you start to pay taxes. And you will have a lot of problems if you won't. You have two options from this angle - hide your business from the authorities or shut it down.
 
Update: I was thinking about this situation and had some new thoughts. Hide is the best decision for you. Because it's not a whole factory or something.
 
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